As part of performing the goodwill impairment test, we first assessed the value
of long-lived assets, including tangible and intangible assets. Due to the lack
of use and discontinuance of the Uptilt and Sparklist trade names, we recognized
a full write-off of these assets of
Based on our annual impairment test conducted at
See Note 6 ''Goodwill'' of the Notes to Consolidated Financial Statements.
Capitalized Software Costs Software licensing We expense internal costs incurred in researching and developing computer software products designed for sale or licensing until technological feasibility has been established for the product. Once technological feasibility is established, applicable development software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We determined that technological feasibility is established when we have completed all necessary planning and designing and after we have resolved all high-risk development issues through coding and testing. Moreover, these activities are necessary to establish that the product can meet our design specifications including functions, features and technical performance requirements. We discontinue capitalization when the product is available for general release to customers. SaaS software costs
We capitalize the direct costs associated with the software we develop for use in providing software-as-a-service to our customers during its application development stage, primarily consisting of employee-related costs. The types of activities performed during the application development stage create probable future economic benefits. Once the software is available for use in providing services to customers, we amortize the capitalized amount over three years with the amortization charged to cost of revenues. We expense activities performed during the preliminary project stage which are analogous to research and development activities. In addition, we expense the types of activities performed during the post-implementation / operation stage. These activities are likely to include release ready and release launch activities.
Total capitalized hosting software costs were approximately
Stock-Based Compensation We amortize stock-based compensation expense based on the fair value of stock-based awards on a straight-line basis over the requisite vesting period as defined in the applicable plan documents which is typically four years. We determine the fair value of each option grant using the Black-Scholes model. The Black-Scholes model utilizes the expected volatility, the term which the option is expected to be outstanding and the risk free interest rate to calculate
the fair value of an option. 48
November 18, 2011, the Board authorized an offer to employees, including executives, to exchange each employee stock option with an exercise price equal to or greater than $4.95for a stock option with an exercise price of $1.58. This offer commenced on March 26, 2012and expired April 23, 2012. 55 employees participated in the exchange offer for a total of 269,183 shares. We used the Black-Scholes method to determine the stock based compensation effect of the tender offer in the fourth quarter of fiscal 2012. Accounting for income taxes We recognize deferred tax assets and liabilities for the future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets, including tax loss and credit carry forwards and liabilities using enacted tax rates expected to be applicable to taxable income in the years in which we expect those temporary differences to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. We establish a valuation allowance if we believe that it is more likely than not that some or all of our deferred tax assets will not be realized. We do not recognize a tax benefit unless we determine that it is more likely than not that the benefit will be sustained upon external examination, such as an audit by a taxing authority. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. See Note 10 ''Income Taxes'' of the Notes to Consolidated Financial Statements.
Recent Accounting Pronouncements
See Note 2 ''Summary of Significant Accounting Policies'' of the Notes to Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.